10 Largest Investors Who Invest in Ethical Investments
Why do people invest? By instinct, I say I invest because it’s the way to financial freedom. But as I scrutinize more on the research process of how I pick my stock investments, it does not all boil down to money. At some point, I also have to evaluate if the company’s mission-vision aligns with my core values.
This practice is called ethical investing — capitalizing on an organization whose business model operates with social and environmental responsibility. Tesla, Inc., for example, is a worthwhile investment because it promotes clean renewable energy through its electric cars and solar products. On the other hand, when I’ve seen Netflix’s Social Dilemma, I was discouraged to invest in tech companies (e.g. Google, Facebook, Twitter) which in the words of Facebook’s Former President, Sean Parker — “exploit a vulnerability in human psychology”
Not all sought-after investments are responsible. For others, rotten capitalism has worked into their system that their business slogan becomes “business as usual”. More often than not, these traditional stocks have greater returns because it’s what we’re used to.
Ethical Investments are Going Up
Despite ethical investments seeming too idealistic to gain support, recent data has shown that sustainable funds are gaining traction, even outperforming their traditional counterparts during the COVID-19 pandemic.
In Morningstar’s June 2020 report conducted on 745 sustainable funds against 4,150 traditional funds in Europe, the average 10-year return of sustainable funds is at 6.9% per year compared to 6.3% per year for traditional funds. Finally, fund performance and responsible investing could come together!
Wealthy Investors Vouch for Sustainable Funds
Even the world’s wealthiest people are investing in sustainable funds. Data from Capgemini’s World Wealth Report shows that 40% of UHNWIs are into ethical investments. The majority of these wealthy people live in the United States with a population of 240,575 in 2019 as per Knight Frank’s Wealth Report 2020.
All of these data hypes me up that ethical investments are slowly becoming a new investment trend that the world baldy needs right now. There are many types of ethical investments. But the list that I’m going to show in the next section is focused on environmental, social, and governance (ESG) funds.
World’s Largest Ethical Investors in 2019
The following companies are taken from a ranking report on 75 of the world’s largest asset managers based on their responsible approach to ethical investments. For the full details of the March 2020 report conducted by ShareAction, you can download the report here. I narrowed the list to not just the 10 largest, but also the leaders and challengers in ethical investments.
Since its first ESG fund launching in 1991, PIMCO has a total of $157 billion assets dedicated to sustainable funds (as of August 31, 2020). Since then, they have opened other more ESG fixed-income funds with the latest one just launched in September 2020. Their award-winning Climate Bond Fund has an average annual return of 4–5% since its inception in 2019. PIMCO’s ESG platform targets both the performance and creating a positive change in the world.
Amundi is Europe’s largest asset manager with over €330 billion assets in ethical investments. Among its many achievements in ethical investing are placing 1st in the SRI & Sustainability ranking from 2015 to 2019 and top A+ rating granted by Principles for Responsible Investment (PRI). Their sustainable investments are geared towards ESG, environmental, and social areas of focus.
3. Legal & General Investment Management
Protecting the planet and the investments go hand-in-hand with Legal & General Investment Management. Their Climate Impact Pledge commits them to invest in renewable energy and ensuring that their property businesses are energy-efficient. Also part of their social responsibility was launching the first fund in the UK that invests in companies with high gender diversity.
4. Nuveen
Nuveen has a sophisticated approach to responsible investing (RI) with in-house research tools that provide high-quality ESG data and analysis procedures. After 5 decades of responsible investing and $30 billion assets in ESG-focused strategies, Nuveen has a long list of ESG funds in fixed-income, domestic and international equities, and multi-assets.
As a member of UN’s Principles for Responsible Investment, AXA Investment Managers have assets dedicated to ESG (€520 billion), Sustainable (€13 billion), and Impact (€1.3 billion) funds. They also have collaborative partnerships with several international organizations like Principles for Sustainable Insurance, Climate Finance Leadership, and the Montreal Carbon Pledge.
6. DWS Group
DWS Group is a German asset manager who’s long started responsible investing since 2008 when they were one of the earliest signatories in UN’s Principles for Responsible Investments. As of 2019, DWS reported €69.7 billion assets under management for ESG and sustainable funds, €16.5 billion in green-labeled real estate buildings, and €862 million for renewable investments. As part of their commitment, ESG funds are now mandatory in investment advice.
7. Aberdeen Standard Investments
Before investing with a purpose, ASI believes that positive change “starts with us”. In their recent sustainability report, they have highlighted target goals and achievements from 2018 to 2019. One of the key achievements were achieving 100% renewable energy in landlord-procured real estate that they manage and promoting workplace diversity by giving equal opportunities to women and other minorities. Their sustainable index funds is a counterpart to traditional index funds with “greener” revenues.
8. BNP Paribas Asset Management
With over €37 billion assets in sustainable thematic funds, BNP continues to partner and join with different initiatives to create positive change. Since January 2020, BNP has enforced the Enhanced Coal Policy where they exclude coal power generators whose whole carbon intensity is above 2017’s global average of 491 gCO2/kWh. In environmental and social aspects, BNP endorses Zero Net Deforestation and encourages companies to prompt diversity into all workplace organizations.
In a report done by Share Action on climate-related shareholder resolutions, Allianz ranked the 2nd among 57 of the world’s largest asset managers. Indeed, Allianz has made a lot of engagements through memberships in the UN’s Principles of Responsible Investing, UK Sustainable and Finance Association, Carbon Disclosure Project, and more. Other worthwhile initiatives that Allianz take part in are the SeaCleaners to combat plastic pollution and AfricaGrow to create more than 25,000 new jobs in Africa by 2030.
10. Schroder Investment Management
A year ago, Schroder announced that they would commit to integrating ESG on all of its investments in 2020. Now, as of June 30, 2020, 80% of Schroder’s total assets under management are ESG-integrated. No doubt, they’ll continue their consistent streak since 2015 of an A+ rating from UN’s Principles of Responsible Investing.
What’s Next for Ethical Investments?
Perhaps the events of the COVID-19 pandemic has caused the change in market sentiments. But the question is, will ethical investments continue to outperform the traditional index post-COVID-19? Is this just a phase or will ethical investments show capitalism in a good spotlight? Only time can tell. But as for me, good things happen to good people. So, let’s ride the momentum for as long as we can.
I am a professional investor sharing my own thoughts and exploring ethical ways to invest. Stay tuned!
